We recently published a list of the 11 Best Semiconductor Equipment Stocks to Buy According to Analysts. In this article, we are going to take a look at where Applied Materials, Inc. (NASDAQ:AMAT) stands against other best semiconductor equipment stocks to buy according to analysts.

As per Straits Research, the US semiconductor manufacturing equipment market size was pegged at US$13.2 billion in 2024. It is expected to grow from US$13.5 billion in 2025 to US$16.5 billion by 2033. This growth is expected to stem from increasing investments in domestic semiconductor manufacturing and the higher demand for advanced semiconductors in critical sectors, including artificial intelligence (AI), 5G, and EVs.

Market Drivers for Semiconductor Manufacturing Equipment

Straits Research highlighted that the resurgence of semiconductor manufacturing in the US is aided by the government initiatives. The federal push is targeted at reducing the dependency on Asian imports as well as strengthening the domestic supply chains. Leading companies continue to establish new fabs in the US, which helps create demand for advanced wafer manufacturing and fabrication equipment. Overall, the increased requirement for high-performance chips in sectors including defense, telecommunications, and automotive further cements the growth of semiconductor equipment.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Growth Opportunities for Semiconductor Equipment

The rapid adoption of AI and 5G technologies in the United States continues to present strong opportunities for the broader semiconductor manufacturing equipment market, highlighted Straits Research. AI chips, primarily the ones utilized in data centers and autonomous vehicles, need advanced manufacturing techniques, fueling demand for cutting-edge equipment. Furthermore, the launch of 5G networks has been driving rapid production of semiconductors, which are capable of handling higher data transmission rates, further enhancing the need for advanced fabrication technology. The US is well-placed as a leader in AI and 5G development, with leading companies driving innovation, demonstrating strong growth potential.

KPMG believes that Al is now the most important application fueling semiconductor companies’ revenue as businesses continue to incorporate the technology in their digital transformations. As a result, the spending on Al semiconductors is projected to be $174 billion in 2025, which is expected to increase to $280 billion in 2028. KPMG also highlighted that semiconductor leaders opine that Al enablers (which include high-bandwidth memory) are the production technology that can have an impact on the broader industry over the upcoming 3 years. In an era in which Al applications are present in all the industries – ranging from autonomous vehicles to healthcare diagnostics, household devices to personalized recommendations—there remains a higher demand for semiconductors aiding Al capabilities.

Our Methodology

To list the 11 Best Semiconductor Equipment Stocks to Buy According to Analysts, we used a screener to shortlist the companies catering to the broader semiconductor equipment market. Next, we filtered out the stocks that analysts see significant upside to. The stocks are arranged in ascending order of their average upside potential, as of April 9. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A technician in a clean room assembling a semiconductor chip using a microscope.

Applied Materials, Inc. (NASDAQ:AMAT)

Average Upside Potential: ~46.1%

Number of Hedge Fund Holders: 80

Applied Materials, Inc. (NASDAQ:AMAT) is engaged in providing manufacturing equipment, services, and software to the semiconductor, display, and associated industries. Jefferies analysts upped the company’s stock to “Buy” from “Hold” with a price objective of $195, up from the previous target of $185. This upgrade was backed by recovering demand, which can help the company’s stock to continue to rise despite the US-China trade tensions. The analysts, led by Blayne Curtis, highlighted the pivoting of macro conditions, which includes a recovery in DRAM and NAND memory demand. Jefferies also believes that Applied Materials, Inc. (NASDAQ:AMAT) remains well-placed to benefit from trends to shift semiconductor supply chains to the US.

Applied Materials, Inc. (NASDAQ:AMAT) is expected to capitalize on the AI-driven semiconductor boom, which offers a strong growth opportunity. The elevated demand for AI applications throughout industries continues to fuel the need for more advanced and specialized semiconductor chips, which, in turn, need more sophisticated manufacturing equipment. Therefore, Applied Materials, Inc. (NASDAQ:AMAT)’s expertise in materials engineering and its broad portfolio of technologies remain in line with the needs of AI chip production.

Vltava Fund, an investment management company, recently published its Q4 2024 investor letter. Here is what the fund said:

“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.

Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)

Overall, AMAT ranks 9th on our list of best semiconductor equipment stocks to buy according to analysts. While we acknowledge the potential of AMAT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than AMAT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.